Mortgage Broker

Consumer Guide 2015 mbabc.ca | 37 ? there was not as much institutional money available in the Canadian mortgage market at that time. Mortgage transactions were routinely accomplished by people lending to friends, family and associates. Mortgages are, in fact, the oldest form of money lending and investing, originating with the development of land ownership many hundreds of years ago. According to Gale, a mortgage is defined as "a loan of money where the repayment obligations are secured by a charge against the title of the property." A person can register a mortgage at the office of B.C.'s Land Title and Survey Authority if he or she lends someone money and the loan is secured by a specific property. A mortgage document is both a contract for the repayment of a debt and an interest in land, which is registered in the land title office in a document called a Form B. The Form B is prepared by a lawyer or notary public, and then forwarded to the borrower's lawyer or notary for signature. Once the Form B is signed, it is registered at the land title office. It then becomes a charge against the title of the property and this is what makes the loan secured. Since mortgages are secured loans, they are popular investments. Security is an important factor when making a decision to invest your money. Other factors are also important such as the value of the property, prior loans or financial charges registered against the property title, and the creditworthiness and income of the borrower. Like any mortgage, monthly payments or other agreed-upon payment plans are made to the investor by the borrower to satisfy the terms of the mortgage. This monthly payment becomes the return on your mortgage investment. The evaluation of the mortgage security is where your mortgage broker becomes very important in determining the suitability of a mortgage loan. How do i invest in mortgages? Generally speaking, you can invest in mortgages in three ways. The traditional way is to register the mortgage loan in your name as the lender. If Mary lends money to Jerry, then Mary is registered as the lender, or mortgagor, on the Form B. When the principal is repaid, Mary will receive the money directly in her own name. Mary could also use her holding company or RRSP as the lending vehicle, but whatever entity she uses, that entity will be registered as the lender. One advantage to lending this way is that the security of title is given to the individual and not an intermediary. Individual mortgage investors have a significant amount of control with this method, and can make decisions easily throughout the course of the loan term – for instance, to change payment dates, to renew or extend the term or to add to the principal amount. Many mortgage brokers represent lenders like Mary. They source the borrower and then match the borrower's request for a mortgage to individuals who have money to lend. Therefore, the mortgage broker is a true intermediary between the person who has money to lend (the lender) and the person who needs to borrow money (the borrower). Another method of investing in mortgages is by syndicating a mortgage loan with other investors. A mortgage syndication involves two or more lenders sharing in the mortgage loan so that the participants each contribute a portion of the mortgage funds and receive that same portion back with the borrower's repayment and final payout of principal. The lenders can be either individuals or companies. Each syndicated mortgage What to expect from your mortgage broker No matter what type of mortgage investment vehicle you choose, a mortgage broker must disclose certain information to you, the investor, as dictated by the Mortgage Brokers Act and the Financial Institutions Commission's (FICOM) rules and regulations. • If you are the only investor in a mortgage, or are part of a small syndicate the mortgage broker arranges, you must receive a Form 9 disclosure. This form provides details of the loan request and also requires the broker provide certain documentation to you such as an appraisal, a credit application and a copy of the credit report of the borrower. • The mortgage broker may also arrange to administer this mortgage investment for you. The mortgage broker must provide a written document to you outlining the work he or she will do to administer the mortgages and any associated costs to you. • Larger syndicates and MICs will provide either an offering memorandum or prospectus that is filed with the B.C. Securities Commission. It will outline the nature of the syndicate or MIC's mortgage investment offerings. • MICs will provide financial statements to investors yearly, and often provide mid-year financial updates on their mortgage investment portfolio's performance. Mortgages are secured loans. Security is an important factor when making a decision to invest your money.

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